Long Term Business Loans: Your Complete Guide

The benefits of long-term business loans, like an SBA loan with a ten-year term, can help you expand your business.

Long-term debt consists of loans and other financial obligations lasting over one year. Terms of long-term debt can stretch to 20 or 30 years depending on the individual lender and use of funds. Long term loans have another advantage: low monthly payments. This gives a business plenty of time to grow, increase income, and repay the loan.

Here’s what you need to know if you’re seeking funds to grow your business or save money.

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Pros of long-term business loans

Build business credit

The SBA sites the inability to obtain funding as a leading cause of small business failure. Having excellent business credit is crucial to obtain long-term debt funding with low rates. If you have obtained long-term debt financing, you increase the likelihood of qualifying for additional funds. A 10-year term SBA loan from banks in the SmartBiz® network can help your business build credit. As an added benefit, when you build your company’s credit, you reduce the need to rely on your personal credit.

To secure the lowest cost capital with the longest terms and manageable payments, keep your credit scores healthy. The SmartBiz Blog has a host of resources to help you understand and manage your credit scores:

Long-term debt fuels growth

Some growth-building uses of long-term debt include buying inventory or equipment, hiring new workers, increasing marketing, shoring up cash flow, and more. For articles about real SmartBiz customers who are growing with long-term SBA loans, visit the Business Story section of the SmartBiz Small Business Blog.

Long-term debt can save a small business money

Often, small business owners rely on expensive debt – like credit cards with sky-high rates or cash advances – to get their business off the ground. Unfortunately, this type of debt cuts into cash flow and can negatively affect day-to-day operations. A long-term loan can be used to help small business owners refinance existing high cost debt.

SmartBiz customer Milton Martinez used this strategy by taking out a low-cost SBA loan. He says, “By getting rid of two small loans I’m saving $15,000 – $18,000 dollars overall. That’s money I can put back into growing my business or into savings.”

Long-term debt can eliminate reliance on expensive debt

There are lenders who use aggressive sales tactics to get businesses to take out short-term cash advances. Some businesses in need of funds will take five or six cash advances in a row. These loans can trap a borrower into a dangerous debt cycle. Instead, consider a loan with low interest rates, long terms, and low monthly payments. Many SBA loans have no prepayment penalties. SBA loans can be used to help small business owners refinance existing high cost debt if you’re caught in trap.

Cons of long-term business loans

Businesses must be established

A long-term loan might be out of reach if you are just getting started. SBA loans from banks in the SmartBiz network require 2 years of operation.

Approval process

More documentation may be required to show the overall financial health of your business. Lenders usually require strong credit scores and evidence that payments can be made in full on time for the life of the loan.

Rigorous approval process

The approval process for long-term loans may be longer than for a shorter-term loan. If you need funds quickly or want to jump on a business opportunity, a short term may be best.

Collateral may be required

Collateral is something pledged as security for repayment of a loan, to be forfeited in the event of a default. In terms of the types of acceptable assets, these can include inventory, a personal possession, accounts receivable, equipment, real estate, machinery, and general intangibles that are not already held by another lender. Newer businesses may not have required collateral.

Interest rates

Though interest rates are often lower, the borrower may end up paying more in interest as the repayment term is much longer.


Considerations for approval of a long-term loan

Cash and credit

Lenders will examine your cash flow and operating expenses. Cash flow statements help small business owners identify liquidity, the strengths and weakness in terms of the cash flowing in and out of accounts. Do you have a steady business income that will ensure payments are timely? Lenders also strongly consider your business and personal credit.

Your track record

An established business with years of success will usually have an easier time obtaining long term business loans. A business that has struggled may find it harder to obtain business funding.

Your stake in the business

Lenders will want to see that an owner is personally invested in a business before approving a business loan.

Use of proceeds

The lender will want to know what this money is used for and why it’s needed, whether it’s for purchasing equipment or working capital or debt refinance.


Lenders want to make sure a business is properly insured in case of fire, flood or similar losses. For insurance requirements you may need to meet, read this post from SmartBiz University: Evaluating Insurance Needs.

Long-term SBA business loans up to 10 years

SmartBiz provides U.S. Small Business Administration loans of up to $350,000 with a 10-year repayment term, which can make it easier to manage monthly payments.
For example, a $100,000 loan with an 10% annual percentage rate would require monthly payments of $1,424 over 10 years, while the same loan with a five-year term would require monthly payments of $2,260.

To qualify, you’ll need to have been in business at least two years and earn at least $50,000 in annual revenue. You’ll also need a good personal credit score of 640 or higher for loans of $30,000 to $350,000. For commercial real estate SBA loans from $500,000 to $5 million require a credit score above 675.

Long-term business loans up to 5 years

If you don’t qualify for an SBA loan or you want funding faster, consider a Bank Term loan* from a bank in the SmartBiz network. Bank Term loans are term loans meant to be repaid in a shorter amount of time than the 10-year term of a typical SBA loan. This type of loan can be a great way to get the funds you need to successfully grow or maintain your business until you are eligible for an SBA loan.

SmartBiz can help you apply for a Bank Term loan with fixed rates for working capital, debt refinance, new equipment purchase, and more. Amounts are available from $30,000 to $350,000.

* Interest rate depends on loan term and the applicant's credit and financial profile.

Before you apply

The SmartBiz Advisor® helps you track the financial health of your business so you are well positioned to secure financing when you need it. SmartBiz Advisor helps you learn how banks typically evaluate your business. Our easy-to-use online tool recommends ways to help you improve your credit and strengthen the financial health of your business as needed. Advisor comes with every SmartBiz account to help you improve your chances of successfully applying for small business funding.**

** The information provided through SmartBiz Advisor, including the Loan Ready Score™, is for educational purposes only. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.